NSW power price rises underscore case for solar

The Independent Regulatory and Pricing Tribunal (IPART) today released its final price determination for 2012-2013 electricity prices.

In a nutshell, they have approved a slightly higher than expected price increase with a NSW average increase of 18.1% for residential and small business customers. Energy Australia customers will be hit with a 20.1% increase, Country Energy 19.7% and Integral Energy customers 11.8%.

In its very comprehensive 152 page report (credit where credit is due, its a highly detailed piece of work), it cites the primary reasons for the change from an expected 16.4% increase to an 18.1% increase as: higher than expected financing costs, coal and gas prices, inflation, energy losses and of course, the introduction of the carbon tax.

As usual, the Sydney Morning Herald opened its story by pinning the blame on the Carbon tax and Green Schemes in its very first paragraph, saving the thinly veiled truth to no less than the very last paragraph. Barry’s media advisor’s must have worked overtime on getting that wording right.

Reading the report, it becomes quickly apparent that even IPART can’t deny that Network and Energy costs make up 75.3% of the average NSW electricity bill AND that rising network costs are the biggest and most avoidable culprit at 8.4% of the increase (after the Carbon Tax at 8.9%). And guess who owns the networks and gets the returns? That’s right, the State Government.

IPART even takes a swipe at the much lamented and ridiculous regulatory structure that encourages excessive spending on Networks, designed to pump up asset value and protect credit ratings, calling again for it’s reform.

For the record, once again, here are the statistics on what the average NSW electricity bill is made up of:

Its also interesting to note that this could well be IPART’s last report and price determination which has fascinating consequences. In an almost abrupt 37 word statement, IPART notes that their future ability to regulate electricity prices “is a matter for the NSW Government”. Watch that space.

The single most disappointing outcome from the entire report is that despite the oft quoted reliance on historical trends to project forward forecasts on costs, IPART refused to accept that STC’s were not worth $40 each and have continued to allow NSW retailers to pass through this cost to consumers, despite the fact they are paying almost half that amount and selling prodigious amounts of PV at a profit, to create the STC’s at a low cost. Well done to my old mate Warwick Johnston at Sunwiz, who gets a mention on this issue having submitted a case for this to be revised, to no avail.

IPART’s failure to address this effectively provides a political tool for the Government by artificially inflating the real cost of Green scheme’s. What I like is despite this, Green Schemes remain the smallest individual component of a bill; and arguably the most popular scheme with consumers who get a benefit when they buy PV.

So, the generators get to increase the cost of coal and make more profit.

So the Network companies get to pump up their asset value and most cases increase energy losses in transmission.

The Retailers get to increase their profits and for the next year, yet again, profiteer off the SRES scheme.

And the Carbon Price and Green schemes cop the blame in the tabloids. At least we are consistent.

But there is good news.

An increase in electricity costs will increase demand for PV. Reading through AEMO’s report again (which we helped model), they define their “rapid uptake scenario” as being driven by “relatively large” increases in electricity price, “rapid system price reductions” and a “clear incentive” from Government. Under this scenario, they predict 18GW of rooftop PV by 2030.

We now have two out of three and arguably, the Carbon tax is the clear incentive.

NSW has started a recovery with PV growth finally restarting this year, despite the continues attempts to blame the industry for pretty much everything that’s bad in the State.

My prediction for 2012-2013 NSW PV uptake? – stronger than expected.

I’ve said it before and Ill say it again; get on board with PV or get out of the way. Its coming whether you like it or not.